Situational Awareness, a hedge fund focused on AI, recently faced a major setback. Founded in 2024 by Leopold Aschenbrenner, the fund once managed up to $45 billion in assets. Its initial size was $20 billion, and it grew fast, returning 1,551 percent since it started. Through June, the fund had a 439 percent return, with a 67 percent gain in July alone. But things changed quickly.
By the end of July 2026, the fund experienced heavy losses on several AI-related stocks. These losses triggered margin calls, forcing Situational Awareness to sell most of its stock holdings. The buyer was Citadel, an investment firm led by Ken Griffin. Despite the sell-off, the fund kept its private investments, including a large stake in Anthropic.
Anthropic is a private AI company that was last valued at $965 billion in a Series H funding round this May. This private book appears to be the fund’s anchor amid the turmoil. Situational Awareness did not touch these holdings when it sold off public positions.
The fund was run by a small team of eight people. Four of them were investment professionals. Leopold Aschenbrenner, the founder, was in his early 20s when he started the fund. Before founding the hedge fund, he worked at OpenAI. He also wrote a 165-page essay in 2024 about AI’s future, which gained attention in the tech world.
The Rise and Sudden Struggles
Situational Awareness grew quickly on the back of AI enthusiasm. It rode the wave of AI stocks soaring in 2025 and early 2026. The fund even claimed that the tech sell-off was a “particularly good time to add funds.” But the market turned sharply against AI stocks in recent weeks.
The fund’s losses forced it to liquidate most of its public stock holdings to meet margin calls. One investor said, “Leopold just stopped taking calls,” signaling a sudden breakdown in communication. Meanwhile, the fund itself publicly admitted, “We let you down this month.”
At its peak, the fund managed $45 billion in assets, more than double its initial size. But the July sell-off shrank its public portfolio dramatically. Now, only its private investments remain largely intact. This includes the stake in Anthropic, which still holds a massive valuation.
What This Means for AI Investing
The situation with Situational Awareness shows how volatile AI investing can be. Even a fund with a stellar track record and huge returns can hit rough patches fast. The AI sector’s rapid rise has attracted many investors, but it remains risky.
Situational Awareness’s story also highlights the pressure younger founders face. Aschenbrenner’s early success brought attention and money, but the market’s recent moves tested the fund’s resilience. The sell-off to Citadel might signal a shift toward more established players in AI investing.
For now, the fund’s private bets on Anthropic remain its lifeline. But the next moves will be closely watched. This episode could be a sign for other AI-focused funds facing similar challenges.
Based on
- A Prominent AI Investor Is Now Crumbling, in What Could Be a Sign of Things to Come — futurism.com
- What smart people are saying about the Situational Awareness stock sell-off to Citadel | Business Insider Africa — africa.businessinsider.com
- Situational Awareness was forced to sell most of its stocks to Citadel. The fund got to keep its best asset. | Business Insider Africa — africa.businessinsider.com
- “…And we call ourselves Situational Awareness.” | The Verge — theverge.com
- Situational Awareness, the hedge fund making headlines, explained | CNN Business — cnn.com
